Most manufacturing businesses struggle with inventory management issues, and many believe the solution is to implement new software.
But despite what vendors tell you, a new software system isn’t going to magically fix your inventory problems.
What we find, in the majority of cases, is inventory management issues are indicative of managerial and operational deficiencies.
These deficiencies can include:
- Leadership Issues & Accountability “flaws”
- Unclear Roles & Responsibilities / Communication Issues
- Inventory Tracking & Reporting
Most issues in inventory management, including most other areas of business, start at the top between ownership and their management teams. These issues are typically fueled by accountability issues and complacent leadership.
It’s been reported that a shocking 84% of employees in the workplace are actively trying to AVOID accountability.
To prevent this mentality, generate a system of accountability through daily reporting, weekly meetings, and regular training to ensure everyone has a clear understanding of their role in the system.
For owners and managers alike, complacency is your worst enemy. Like a virus, it can infect a business from within, breeding a culture that accepts mediocre results and poor performance.
More importantly, it establishes a culture that accepts the status quo and doesn’t push for any kind of growth or self improvement.
The best way to combat accountability and complacency issues in your business is to create a culture that says:
“We have to do this right the first time, and I’m going to take ownership and lead by example”.
It doesn’t matter how appealing new software may seem; if your employees aren’t doing their jobs properly, it’s a waste of your time and money.
Unclear Roles & Responsibilities / Communication Issues
91% of employees don’t understand what their organization or boss is trying to achieve. When these employees are managing something as costly as inventory, not having a crystal clear understanding of their roles and responsibilities could be detrimental to the company’s success.
As the owner, you should know what the right level of inventory is and communicate that to everyone around you.
Concern yourself with the physical quantities needed to drive productions. Clearly explain to your workers that the higher the inventory turns/fewer the days, the better.
Keep a constant line of communication between all levels of the business, and visit your storage areas frequently.
Make it a priority for yourself, and for your staff. No amount of software can provide the clarity that strong communication between you and your business can!
Inventory Tracking & Reporting
Improper inventory tracking is one of the major causes for lack of cash flow, weak profit, and stocking issues. Anything that isn’t properly tracked will create and accumulate inaccurate data quickly. When setting up an inventory management system and reporting, remember to:
Keep it simple
Don’t make things more complicated for yourself.
In the past, for example, inventory was controlled on index cards, and managed manually. It was a simple process, but effective.”
Nowadays, technology is intended to make things much more user friendly than pen and paper.
Monitor your Mins and Maxes
There’s an old system called “mins and maxes”. When you hit a minimum, you order up to your maximum level. You don’t go past the maximum, you don’t let it fall below the minimum.
It’s critical that accountability and communication are executed properly along with “mins and maxes”, or else things can go south quickly.
Don’t allow your employees to overstock as a method for “managing” inventory. Teach them how to properly manage product and to avoid stacking unnecessary stock.
Just because a customer says they need your products doesn’t mean they will buy!
Follow the Golden Rule
Remember, Nothing good happens when inventory sits.
Unless it gets sold or used for how it’s intended, inventory only goes bad, gets stolen, breaks, gets run over by forklifts, becomes obsolete, etc.
The longer you let your inventory sit, the more you risk having something bad happen!
While times have shifted into the digital age, it’s important to remember that technology isn’t always the answer. Remember…
Software doesn’t solve operational problems, it compounds them. If you put garbage in, you’re going to get garbage out!
Keep Manufacturing Processes Rock Solid
Inventory management as it is, is your life. It’s how you make your products, how you build your profit, and everything else follows when the manufacturing process is rock solid.
You can have the best facilities, the best paying clients, and the most elaborate software, but without a proper plan you will never be able to maximize your business’s profits to its fullest potential.
Give your employees a clear plan, lay out their responsibilities, and implement accountability on both yourself and your business!